Federal Reserve Governor Christopher Waller said that the rise in U.S. long-term Treasury yields is helping to restrain demand in interest-rate-sensitive sectors such as housing and autos, acting as a form of monetary policy tightening.

"When yields go up, does that have an impact on rate-sensitive industries like housing and autos? Of course it does," Waller said on Tuesday. He noted that while this was not the Fed's intention, the rise in yields has indeed "done some of the work."

Yields in the United States and other developed economies have climbed to their highest levels in decades, tightening financial conditions. Traders have responded by scaling back their expectations for rate hikes, with data showing that since mid-September, the cumulative amount of rate increases priced into swap contracts across eight major economies has fallen by nearly 200 basis points.

Last week, Waller hinted that further rate hikes may be needed to curb inflation, but he added that officials have some flexibility on timing when considering another increase. Economists expect Wednesday's inflation data to show that overall inflation accelerated in September as energy costs rose amid the U.S.-Iran war, while core inflation is expected to cool.